Beige Book: Loan Demand and Credit Conditions Improve

The Federal Reserve's Beige Book reported that lenders in most Districts noted an improvement in loan demand and credit conditions during the early April to late May reporting period.

"Small and medium-sized banks in the New York District reported the most broad-based increase in loan demand since the mid-1990s. Several bankers in the Richmond District said the volume of small business loan applications was markedly higher. Drivers of business loan demand included energy, healthcare, and commercial real estate. Several Districts noted increased demand for capital spending loans.

Reports on mortgage lending generally indicated slow improvement. The New York District noted stronger mortgage lending, although growth in refinancing eased. The Cleveland District indicated strong mortgage demand and a shift from home refinancing to new purchases. The Richmond District cited continued improvement in mortgage demand, although refinancing still dominated much of the mortgage lending. The Atlanta District said that more applicants had ample cash for down payments or enough equity in their homes to meet refinancing requirements. Demand for commercial real estate loans was generally reported to be stronger. Districts reporting on consumer lending noted steady demand, with some strength in auto loans.

A number of Districts, including Cleveland, Atlanta, Chicago, Dallas, and San Francisco, said loan pricing remained quite competitive. New York District respondents noted a decrease in spreads of loan rates over the cost of funds, particularly for commercial mortgages. Lending standards were relatively unchanged to slightly easier across Districts and loan types. Bankers reporting on deposit growth indicated that deposits were steady or continued to increase. Credit quality remained solid, and there were several reports of improved loan quality. Most District banks said loan delinquencies continued to decline."

Read the Beige Book.